The Importance of Mortgage Protection Insurance

Mortgage protection insurance is a type of life insurance policy that can be purchased to pay off the outstanding balance of a mortgage if the homeowner should die. Mortgage protection insurance is needed by many people, provides a range of benefits and has few alternatives. Mortgage protection insurance should not be confused with private mortgage insurance.

Mortgage protection insurance is needed by many people as a way to provide a backstop to pay off a home if the main earner should suddenly die. Mortgage protection insurance provides comfort to those who are worried about making mortgage payments for an unforeseen event. The benefit amount that is paid does not necessarily need to go to pay off a home mortgage. Money can go towards a car loan or put in a savings account to accrue interest. The payment amount for mortgage protection insurance policies typically pays out the full amount of the original mortgage regardless of the outstanding balance on the loan.

There are many benefits to a mortgage life insurance policy. The biggest benefit is that a policy for mortgage protection insurance typically does not require any type of medical exam. Other benefits include the return of premiums paid on some policy types at the end of the policy term. Some types of policies may also include an unemployment benefit. Another benefit to mortgage protection insurance is that interest can be earned on the premiums that have already been paid. The benefit can sometimes be paid early for policyholders that have a serious or terminal illness.

There are few alternatives available that offer the type of benefit that is provide by mortgage protection insurance. One alternative that is available is to purchase a term or permanent life insurance policy that will pay a benefit to a beneficiary. A life insurance policy can generally be purchased for any amount that is needed by the policyholder. However, there are certain qualifications that need to be met and a policy might cost more depending on an insured’s smoking status as well as the result of a medical examination. In addition unless there is a renewable guarantee the premiums for a life insurance policy can increase as a policyholder ages.

Mortgage protection insurance is different from private mortgage insurance. Private mortgage insurance is required by most lenders to protect themselves from a loan default by the borrower. The lender is the beneficiary of private mortgage insurance whereas a policyholder can name their own beneficiaries.